EdR Announces Second Quarter 2014 Results

MEMPHIS, Tenn.--(BUSINESS WIRE)--EdR (NYSE:EDR), one of the nation’s largest developers, owners and
managers of collegiate housing, today announced results for the quarter
ended June 30, 2014.

Company Highlights

Core funds from operations (“Core FFO”) was $17.3 million, or $0.15
per share/unit for the second quarter, compared to $14.5 million, or
$0.13 per share/unit in the prior year, an increase of 15% on a per
share basis;

Same-community net operating income ("NOI") improved 2.6% for the
quarter on a 2.5% growth in revenue partially offset by a 2.4%
increase in operating expenses;

Preleasing for the 2014-2015 lease term is 360 basis points ahead of
last year with the same-community portfolio 90.9% preleased. The
same-community portfolio is projected to open the 2014-2015 lease term
with an increase in revenue ranging from 3% to 4%, comprised of a 1%
to 2% increase in occupancy and an approximate 2% growth in net rental
rates;

Completed an over-subscribed and upsized follow-on equity offering
raising $239.4 million in net proceeds that were used to reduce the
balance on the Company's revolving credit facility and provide
financing for:

Two new developments to be delivered summer 2015 for $90.0
million, adjacent to the University of Louisville and the
University of Connecticut;

The pending acquisition of The District on Apache, a 900-bed
community adjacent to Arizona State University that is expected to
close in September 2014 for approximately $92.0 million;

Received $3.0 million guarantee fee and complete repayment of $18.0
million mezzanine investment related to the participating development
at Johns Hopkins on July 1st;

In July, sold two communities for $29.9 million; and

Updated full year Core FFO guidance of $0.61 - $0.64 per share/unit,
representing an 11% to 16% increase over 2013.

“We achieved another quarter of double-digit Core FFO per share growth,”
commented Randy Churchey, EdR’s president and chief executive officer.
“Furthermore, with a record 6,000 beds opening this summer in twelve
buildings at eight universities, we are well positioned for the future.
Our pipeline of opportunities at major universities remains robust and
we are excited about our prospects as we move ahead."

Net Income (Loss) Attributable to Common Stockholders

Net income attributable to common stockholders for the quarter was a
loss of $8.8 million, or $0.08 per diluted share, compared to net income
of $3.8 million, or $0.03 per diluted share, for the prior year. The
Company recognized a $9.9 million impairment charge in June of 2014
related to pending dispositions and recognized a gain on sale of assets
of $3.9 million in the second quarter of 2013. Excluding these gains and
loss on asset transactions, net income increased $1.2 million for the
quarter. The main contributors to this increase were a $5.8 million
increase in community net operating income (NOI) partially offset by a
$2.9 million increase in depreciation and a $1.2 million increase in
interest and other nonoperating expenses.

Core Funds From Operations

Core FFO for the quarter was $17.3 million, as compared to $14.5 million
in the prior year, an increase of 18.8%. Core FFO per share/unit for the
quarter increased 15.4% to $0.15. The improvement in Core FFO mainly
reflects the increase in operating profits from new communities offset
by higher interest expense in 2014.

A reconciliation of funds from operations (“FFO”) and Core FFO to net
income is included with the financial tables accompanying this release.

Same-Community Results

Net operating income was $18.7 million for the quarter, an increase of
2.6%, or $0.5 million, from the prior year. Revenue for the quarter was
up 2.5% as compared to the prior year with a 1.9% increase in rental
rates, a 0.4% improvement in occupancy and a 0.2% increase in other
income. Operating expenses for the quarter increased $0.3 million, or
2.4%, mainly due to a $0.3 million increase in real estate taxes. In
total, all other operating expenses increased approximately 40 basis
points for the quarter.

Preleasing for the same-community portfolio is currently 360 basis
points ahead of prior year with 90.9% of the beds preleased for the
fall. Based on current leasing velocity and market conditions, the
same-community portfolio is projected to open the 2014-2015 lease term
with revenue growth ranging from 3% to 4%, comprised of a 1% to 2%
increase in occupancy and an approximate 2% growth in average net rental
rates.

Construction on the next phase of the UK campus housing revitalization
plan, which includes five buildings with 2,381 beds at a total project
cost of $138.0 million, is proceeding as planned for opening next month.
The 2,982 beds that will be open this fall, which include the 601 beds
delivered in 2013, are 180% applied and 100% leased for this fall.

Construction on the 2015 deliveries, which include 1,610 beds for a
total cost of $101.2 million, and the 2016 deliveries, which include
1,141 beds for a total cost of $83.9 million, are all underway and
proceeding as planned. To date, under this long-term relationship with
UK, a total of 5,733 beds in live learn communities have been approved
for a total cost approaching $350.0 million.

Investment Activity

Construction is on schedule for the 2014 and 2015 development deliveries
at the universities of Colorado, Connecticut, Minnesota and Georgia as
well as at Duke University. The 2014 development deliveries, including
the pre-sale at Florida International University, are all on schedule to
open next month and in total have increased the Company's gross assets
by 19%.

On July 1st, the third-party owners of our development at
Johns Hopkins University successfully closed on permanent financing for
the community. The proceeds from the refinancing were used to repay
in-full their construction loan as well as the $18.0 million mezzanine
investment made by EdR. At the time of the refinancing, the Company also
received its $3.0 million fee for guaranteeing the original construction
loan.

The Company entered into agreements to purchase The District on Apache -
a collegiate housing community serving Arizona State University (ASU) -
for approximately $92.0 million. The 900-bed community, within walking
distance of the ASU Tempe campus, opened in August 2013 and is 100%
occupied. The community is currently 98% preleased for this fall. The
acquisition is anticipated to close in September and has a targeted
first-year, unleveraged economic yield of 6.25%.

In June, the Company began construction on the fourth phase of its
highly successful development pedestrian to the University of
Connecticut. Scheduled to open summer of 2015, the community will add
390 beds in 204 units for a total cost of $45.0 million. This phase will
be adjacent to the first three phases which total 619 beds in 414 units
that are 100% pre-leased for the 2014-2015 lease term.

The Company executed joint venture agreements in June with Landmark
Properties to develop, own and manage a $45.0 million collegiate
community adjacent to the University of Louisville. This is the first
cottage-style community that is adjacent to a major university campus.
EdR will be 75% owner and will manage the community through lease-up and
after its summer 2015 opening.

In July, the Company completed the previously announced sales of a
480-bed community built in 2003 that is approximately two miles from the
University of South Carolina campus and a 576-bed community built in
1999 that is about a mile from the core of Auburn University’s campus.
The $29.9 million of net proceeds from these dispositions were used to
pay-off approximately $16.7 million of mortgage debt, with an average
interest rate of 4.9%, and to pay down the Company's unsecured revolving
credit facility. In the third quarter the Company will recognize an
approximate gain of $8 million related to these sales.

The Company is in the process of marketing four additional communities
for sale. Based on current estimates, the Company would incur losses on
the sale of two of the communities and gains on the sale of the other
two. Generally accepted accounting principles require an impairment
charge be recognized when the carrying value of an asset is determined
to be impaired while gains are not recognized until the time of sale. As
such, the Company recorded a non-cash impairment charge of $9.9 million
in the second quarter related to two of the marketed communities. The
Company anticipates recording a gain on the sale of the other two
communities if and when the sales close; however, there is no guarantee
that all or any of these communities will ultimately be sold.

Capital Structure

The Company completed a follow-on equity offering in June, selling 24.5
million shares including the exercise of the underwriters' option to
purchase additional shares. The offering was upsized due to overwhelming
investor demand, raising $239.4 million in net proceeds that were used
to pay down the Company's unsecured revolving credit facility, reducing
our debt to gross assets from 43.4% to 32.5%. The proceeds have
effectively prefunded the new acquisition and developments that were
announced as part of the offering.

At June 30, 2014, the Company had cash and cash equivalents totaling
$11.2 million and going forward has$400 million of availability on its
unsecured revolving credit facility. The Company's debt to gross assets
was 32.5%, its net debt to EBITDA - adjusted was 5.6x, and its interest
coverage ratio was 4.4x. The Company has the financial capacity through
operating cash flow and availability under its revolving credit facility
to fund all of its announced acquisitions and developments.

Earnings Guidance and Outlook

The Company is increasing its post follow-on equity offering and related
transactions low- and high-end Core FFO guidance by 7% and 2%,
respectively, to a range of $0.61 to $0.64 per share/unit, which
represents an 11% to 16% growth rate over 2013. This guidance increase
is mainly attributable to (1) better than expected net operating income
from all communities derived from our successful leasing efforts for the
2014/2015 leasing cycle, and (2) the successful refinancing of the Johns
Hopkins development (collection of the $3 million debt guarantee fee
partially offset by the foregone interest income for the second half of
2014 due to the repayment of our $18 million mezzanine investment),
which was not included in the previous low-end guidance range.

The June follow-on equity offering and related transactions, which
included two asset sales, one pending acquisition and deleveraging the
balance sheet, reduced the Company's original Core FFO per share/unit
guidance by $0.05 to a range of $0.57 to $0.63.

Consistent with Company policy, guidance does not include the impact of
any unannounced third-party development or management contracts,
acquisitions including pre-sale agreements or purchase options,
dispositions, ONE Plansm developments or capital transactions.

Webcast and Conference Call

EdR will host a conference call for investors and other interested
parties beginning at 10:00 a.m. Eastern Time on Monday, July 28, 2014.
The call will be hosted by Randy Churchey, president and chief executive
officer.

The conference call will be accessible by telephone and the Internet. To
access the call, participants in the U.S. may dial (877) 705-6003, and
participants outside the U.S. may dial (201) 493-6725. Participants may
also access the call via live webcast by visiting the company's investor
relations website at www.EdRTrust.com.

The replay of the call will be available at approximately 1:00 p.m.
Eastern Time on Monday, July 28, 2014 through midnight Eastern Time on
Monday, August 11, 2014. To access the replay, the domestic dial-in
number is (877) 870-5176, the international dial-in number is (858)
384-5517, and the passcode is 13586081. The archive of the webcast will
be available on the company's website for a limited time.

About EdR

EdR (NYSE:EDR) is one of America’s largest owners, developers and
managers of collegiate housing. EdR is a self-administered and
self-managed real estate investment trust that owns or manages 67
communities in 22 states with nearly 37,000 beds within more than 12,800
units. For more information, please visit the company's website at www.EdRTrust.com.

Statements about the Company’s business that are not historical facts
are “forward-looking statements,” which relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or trends
and similar expressions. In some cases, you can identify forward-looking
statements by the use of forward-looking terminology such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts” or “potential” or the negative of
these words and phrases or similar words or phrases which are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. Forward-looking statements are
based on current expectations. You should not rely on forward-looking
statements because the matters that they describe are subject to known
and unknown risks and uncertainties that could cause the Company’s
business, financial condition, liquidity, results of operations, Core
FFO, FFO and prospects to differ materially from those expressed or
implied by such statements. Such risks are set forth under the captions
“Risk Factors,” “Forward-Looking Statements” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” (or similar captions) in EdR's most recent annual report on
Form 10-K, and as described in EdR's other filings with the Securities
and Exchange Commission. Forward-looking statements speak only as of the
date on which they are made, and, except as otherwise may be required by
law, the Company undertakes no obligation to update publicly or revise
any guidance or other forward-looking statement, whether as a result of
new information, future developments, or otherwise, except as required
by law.

Non-GAAP Financial Measures

Funds from Operations (FFO)

As defined by the National Association of Real Estate Investment Trusts,
FFO represents net income (loss) (computed in accordance with U.S.
generally accepted accounting principles ("GAAP")), excluding gains (or
losses) from sales of property and impairment write-downs of depreciable
real estate plus real estate-related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures will be
calculated to reflect FFO on the same basis. The Company presents FFO
available to all stockholders and unitholders because management
considers it to be an important supplemental measure of the Company’s
operating performance, believes it assists in the comparison of the
Company’s operating performance between periods to that of different
REITs and believes it is frequently used by securities analysts,
investors and other interested parties in the evaluation of REITs, many
of which present FFO when reporting their operating results. As such,
the Company also excludes the impact of noncontrolling interests, only
as they relate to operating partnership units, in the calculation. FFO
is intended to exclude GAAP historical cost depreciation and
amortization of real estate and related assets, which assumes that the
value of real estate diminishes ratably over time. Historically,
however, real estate values have risen or fallen with market conditions.
Because FFO excludes depreciation and amortization unique to real
estate, gains and losses from property dispositions and extraordinary
items, it provides a performance measure that, when compared year over
year, reflects the impact to operations from trends in occupancy rates,
rental rates, operating costs, development activities and interest
costs, providing perspective not immediately apparent from net income.

The Company also uses core funds from operations, or Core FFO, as an
operating measure. Core FFO is defined as FFO adjusted to include the
economic impact of revenue on participating projects for which
recognition is deferred for GAAP purposes. The adjustment for this
revenue is calculated on the same percentage of completion method used
to recognize revenue on third-party development projects. Core FFO also
includes adjustments to exclude the impact of straight-line adjustment
for ground leases, gains/losses on extinguishment of debt, transaction
costs related to acquisitions and reorganization or severance costs. The
Company believes that these adjustments are appropriate in determining
Core FFO as they are not indicative of the operating performance of the
Company’s assets. In addition the Company believes that Core FFO is a
useful supplemental measure for the investing community to use in
comparing the Company to other REITs as most REITs provide some form of
adjusted or modified FFO.

Net Operating Income (NOI)

The Company considers NOI to be a useful measure of its collegiate
housing operating performance. The Company defines NOI as rental and
other community-level revenues earned from our collegiate housing
communities less community-level operating expenses, excluding
management fees, depreciation, amortization, ground lease expense and
impairment charges and including regional and other corporate costs of
supporting the communities. Other REITs may use different methodologies
for calculating NOI, and accordingly, the Company's NOI may not be
comparable to other REITs. The Company believes that this measure
provides an operating perspective not immediately apparent from GAAP
operating income or net income. The Company uses NOI to evaluate
performance on a community-by-community basis because it allows
management to evaluate the impact that factors such as lease structure,
lease rates and tenant base, which vary by property, have on the
Company’s operating results. However, NOI should only be used as an
alternative measure of the Company’s financial performance.

Adjusted EBITDA is defined as net income or loss excluding: (1) straight
line adjustment for ground leases; (2) acquisition costs; (3)
depreciation and amortization; (4) loss on impairment of collegiate
housing assets; (5) gain on sale of collegiate housing assets; (6)
interest expense; (7) other non-operating expense (income); (8) income
tax expense (benefit); and (9) non-controlling interest. Management
considers Adjusted EBITDA useful to an investor in evaluating and
facilitating comparisons of the Company's operating performance between
periods and between REITs by removing the impact of the Company's
capital structure (primarily interest expense) and asset base (primarily
depreciation and amortization) from our operating results. Adjusted
EBITDA should only be used as an alternative measure of the Company's
financial performance.

Net debt to EBITDA - adjusted is calculated to normalize the impact of
non-producing construction debt. In the calculation, net debt is total
debt less cash and excludes non-producing debt related to assets under
development at time of calculation. EBITDA is Pro Forma Adjusted EBITDA,
which includes proforma adjustments to reflect all acquisitions and
development assets that are opened as if such had occurred at the
beginning of the 12 month period being presented.

Debt to Gross Assets

Debt to gross assets is defined as total debt, excluding the unamortized
debt premium, divided by gross assets, or total assets excluding
accumulated depreciation on real estate assets. We consider debt to
gross assets useful to an investor in evaluating our leverage and in
assessing our capital structure, because it excludes noncash items such
as accumulated depreciation and provides a more accurate depiction of
our capital structure. Debt to gross assets should only be used as an
alternative measure of the Company's financial performance.

EdR AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

June 30, 2014

December 31, 2013

(unaudited)

Assets

Collegiate housing properties, net

$

1,307,519

$

1,388,885

Collegiate housing properties - held for sale, net

21,166

-

Assets under development

233,441

116,787

Cash and cash equivalents

11,162

22,073

Restricted cash

14,069

12,253

Other assets

78,690

70,567

Total assets

$

1,666,047

$

1,610,565

Liabilities and equity

Liabilities:

Mortgage and construction loans, net of unamortized premium

$

361,173

$

422,681

Unsecured revolving credit facility

66,000

356,900

Unsecured term loan

187,500

-

Accounts payable and accrued expenses

78,566

67,646

Deferred revenue

19,963

23,498

Total liabilities

713,202

870,725

Commitments and contingencies

-

-

Redeemable noncontrolling interests

9,780

9,871

Equity:

EdR stockholders’ equity:

Common stock, $0.01 par value per share, 200,000,000 shares
authorized, 139,437,355 and 114,740,155 shares issued and
outstanding as of June 30, 2014 and December 31, 2013, respectively

(1) The gain on sale of collegiate housing assets in 2013 is
included in discontinued operations and the gain recognized in 2014 is
included as gain on sale of collegiate housing communities on the
Condensed Consolidated Statements of Comprehensive Income.

(2) This represents the straight-line rent expense adjustment
required by GAAP related to ground leases. As the ground lease terms
range from 40 to 99 years, the adjustment to straight-line these
agreements becomes material to our operating results, distorting the
economic results of the communities.

(3) FFO on participating developments represents the economic
impact of interest and fees not recognized in net income due to the
Company having a participating investment in the third-party
development. The adjustment for interest income is based on terms of the
loan.

(4) FFO and Core FFO per weighted average share/unit were
computed using the weighted average of all shares and operating
partnership units outstanding, regardless of their dilutive impact.

(1) Represents the straight-line rent expense adjustment
required by GAAP related to ground leases. As ground lease terms range
from 40 to 99 years, the adjustment to straight-line these agreements
becomes material to our operating results, distorting the economic
results of the communities.

(2) FFO on participating developments represents the economic
impact of interest and fees not recognized in net income due to the
Company having a participating investment in the third-party
development. The adjustment for development fees is recognized under the
same percentage of completion method of accounting used for third-party
development fees. The adjustment for interest income is based on terms
of the loan.

(3) FFO and Core FFO per weighted average share/unit were
computed using the weighted average of all shares and operating
partnership units outstanding, regardless of their dilutive impact.

EdR AND SUBSIDIARIESRECONCILIATION OF NON-GAAP MEASURES(Unaudited)

The following is a reconciliation of the Company's GAAP operating income
to NOI for the three months ended June 30, 2014 and 2013 (in thousands):

For the three months ended June 30,

For the six months ended June 30,

2014

2013

2014

2013

Operating income (loss)

$

(3,651

)

$

3,694

$

4,661

$

10,807

Less: Third-party development services revenue

757

759

1,559

1,150

Less: Third-party management services revenue

786

823

1,804

1,792

Plus: Development and management services expenses

2,282

1,618

4,623

3,389

Plus: General and administrative expenses

1,984

2,021

4,102

4,044

Plus: Ground leases

1,934

2,210

3,833

3,798

Plus: Impairment loss on collegiate housing property

9,870

-

11,780

-

Plus: Depreciation and amortization

14,458

11,562

28,241

22,161

NOI

$

25,334

$

19,523

$

53,877

$

41,257

The following is a reconciliation of the Company's GAAP net income to
Adjusted EBITDA for the trailing twelve months ended June 30, 2014 (in
thousands):

Less: Six

Trailing Twelve

Six months ended

Plus: Year Ended

months ended

Months ended

June 30,

December 31,

June 30,

June 30,

2014

2013

2013

2014

Net income attributable to common stockholders

$

3,258

$

4,323

$

7,141

$

440

Straight line adjustment for ground leases

2,425

5,255

2,807

4,873

Acquisition costs

23

393

299

117

Depreciation and amortization

28,241

48,098

22,161

54,178

Depreciation and amortization - discontinued operations

-

1,767

1,086

681

Loss on impairment of collegiate housing assets

11,780

5,001

-

16,781

Gain on sale of collegiate housing assets

(10,902

)

(3,913

)

(3,895

)

(10,920

)

Interest expense

10,568

17,526

7,909

20,185

Other nonoperating expense

1,555

1,311

587

2,279

Income tax expense (benefit)

(312

)

203

(237

)

128

Noncontrolling interests

360

308

27

641

Adjusted EBITDA

$

46,996

$

80,272

$

37,885

89,383

Annualize acquisitions/developments (1)

-

-

-

4,426

Pro Forma Adjusted EBITDA

$

46,996

$

80,272

$

37,885

$

93,809

(1) Proforma adjustment to reflect all acquisitions and
development deliveries as if such transactions had occurred on the first
day of the period presented.

The following is a reconciliation of the Company's GAAP total assets to
gross assets as of June 30, 2014 and December 31, 2013 (in thousands):